Fortune 500 Strategic Solutions

Reducing customer churn

Everyone knows that customer loyalty is an important and often elusive element of business. Building and maintaining a strong customer base takes planning and effort and does not evolve over night. As a result, the concept can begin to lose traction and without due diligence, may wind up as a low priority.

However, when you stop to consider the following statistics, the financial impact that high customer churn has on profit margins, shouldn’t be taken lightly.

• It costs a business seven times more to attract a new customer, than to keep an existing one
• The average company loses 10% of its customers each year
• A 5% reduction in customer defection rate can increase profits by as much as 25%-125%, depending on the industry

Retaining valued employees

Another key area that is often overlooked; is that of employee retention.

Just like customer churn, a high rate of employee turnover represents a major expense to any business.

It costs on average, $5,000 to replace an entry level employee. If a company employing 500 people, with a turnover rate of 10% annually, could reduce their attrition rate by as little as 1%, they could enjoy a cost savings of $25,000 per year. These numbers increase significantly in both cost and potential savings, when you factor in mid-upper level, management salaries.

The financial benefit is clear, but what about the intangible benefits? Long-term employees are knowledgeable, experienced and loyal and as a result, tend to deliver superior customer service. They also form connections with their regular customers and it is this friendly, knowledgeable and efficient service delivery that keeps the customers coming back and rewarding businesses with their hard earned dollars.